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ICT Mentorship Core Content - Month 04 - ICT Breaker Block
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ICT Mentorship Core Content - Month 04 - ICT Breaker Block

Understanding Breakers in Market Structure

Introduction to Breakers

  • The discussion begins with an overview of using breakers as a form of market mitigation to identify potential trade setups.
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  • A scenario is presented where price trades lower, creating a short-term low that, when violated, may indicate a false break or "turtle soup" long opportunity.

Identifying Bullish Breakers

  • When the price approaches the previous low and shows resistance, traders should wait for significant upward movement indicating a market structure shift.
  • The focus shifts to the old high acting as support once it is revisited after being broken; this indicates orders from previous shorts looking to mitigate losses.
  • Confirmation of a bullish breaker occurs when price moves away from the old high, suggesting higher objectives in future price action.

Understanding Bearish Breakers

  • Conversely, when the market trades higher and then breaks below the low that created that new high, it signals a bearish breaker setup.
  • A bearish breaker is characterized by a down close candle at the most recent swing low before an old high is violated; buyers trapped at this level will seek to mitigate losses upon return.

Key Characteristics of Market Structure Shifts

  • Important indicators include running out buy stops above an old high and observing quick repricing after these stops are taken.
  • Once market structure breaks down, any retracements back up will be viewed as selling opportunities until confirmed otherwise.

Trading Strategies Based on Breaker Analysis

  • For bullish setups, look for violations of old lows followed by retracement back to swing highs where sellers previously entered positions.
  • Anticipate range expansion upwards following confirmation of bullish breakers as sell orders are mitigated and new buying orders emerge.
  • Signs of confirmation include runs on sell stops below old lows and subsequent upward movements breaking through short-term highs.

Real Price Action Examples

  • An example illustrates how markets can shift structures after taking out sell-side stops; this leads to potential bullish scenarios as prices rally back up.

Understanding Market Dynamics and Support Levels

Analyzing Chart Patterns

  • The importance of studying chart formations is emphasized, particularly when the market creates a low followed by a lower trade that breaches a short-term high. This pattern indicates potential support levels.
  • A common mistake among new traders is relying solely on horizontal lines for support and resistance without understanding the underlying market dynamics. It's crucial to have a narrative explaining price movements.
  • The concept of "breaker" is introduced, which signifies the act of running stops to pull liquidity from the market. Recognizing violated short-term lows and highs can help identify probable support levels.

Identifying Support Levels

  • When analyzing price action, it's essential to consider the entire range created by previous candles rather than just isolated points. This approach helps in understanding where prices may stabilize.

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Channel: The Inner Circle Trader · Playlists: 2016 ICT Private Mentorship Core Content Month 04
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2016 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in December 2016. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, such as a “stop-loss” or “stop-limit” order, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.